Quarterly report pursuant to Section 13 or 15(d)

3. DEBT

v3.5.0.2
3. DEBT
9 Months Ended
Sep. 30, 2016
Debt Disclosure [Abstract]  
3. Debt

Loan and Security Agreement

 

On June 19, 2015, the Company entered into an LSA with Oxford for up to $21.0 million of debt financing in two term loan tranches. The first term loan tranche of $16.0 million from the LSA (the “Term A Loan”) was primarily used to repay the Company’s previous debt facility and the remaining $5.0 million term loan tranche is available at ADMA’s option if RI-002’s BLA is approved by the FDA on or before January 31, 2017, which funding would also extend the interest only period for an additional six months pursuant to the May 2016 amendment to the LSA described below.

 

The outstanding term loans bear interest at a rate per annum equal to the greater of (i) 7.80% and (ii) the sum of (a) the three month U.S. LIBOR rate (as reported in The Wall Street Journal) on the date occurring on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (b) 7.54% on the outstanding principal balance.  The Company is obligated to begin to repay the principal over 36 months beginning on February 1, 2017, unless accelerated as a result of certain events of default.  A final payment equal to 8.95% of the funded loan amount is due at the earlier of loan maturity or prepayment.  In the event of the six-month interest only extension, the final payment will be 9.95% of the funded loan, which shall also be due at the earlier of loan maturity or prepayment.  All term loans mature no later than January 1, 2020.  The loans are secured by the Company’s assets, except for its intellectual property (which is subject to a negative pledge). The LSA contains customary representations, warranties and covenants, including limitations on incurring indebtedness, engaging in mergers or acquisitions and making investments, distributions or transfers.  

 

In connection with the entry into the LSA, on June 19, 2015, the Company issued to Oxford a seven-year warrant, expiring on June 19, 2022, to purchase 74,309 shares of common stock at an exercise price of $8.51 per share. The Company recorded $367,700 as the fair value of the warrant to additional paid-in capital and as a debt discount to the carrying value of the loan.  The key assumptions used to value the warrants included: volatility of 57% on the Company’s common stock based upon a pro rata percentage of the Company’s common stock’s volatility and similar public companies’ volatilities for comparison, an expected dividend yield of 0.0%, a risk-free interest rate of 1.99% and a term of seven years.  As a result of prepaying the Company’sprior loan before maturity, the Company incurred a loss on extinguishment of debt of $0.7 million comprised of unamortized debt issuance costs and unamortized debt discount related to the warrants issued to the Company’s prior lender, along with a prepayment penalty.

  

In May 2016, the Company amended the LSA with Oxford (“the Amended LSA”) which provided ADMA with an additional $4.0 million term loan (the “Term B Loan”), the availability of which was conditioned on completing an equity financing of its common stock of at least $10.0 million in gross proceeds no later than May 31, 2016.  On May 3, 2016, the Company completed an underwritten public offering of its common stock, raising gross proceeds of approximately $14.1 million and subsequently borrowed the additional $4.0 million from Oxford under the Amended LSA, which brings the total principal amount borrowed to $20.0 million.  Under the Amended LSA, the Company may borrow an additional aggregate amount up to $5.0 million (the “Term C Loan”), at its option during the period commencing on the date the Company’s BLA for RI-002 is approved by the FDA and ending on the earlier of (i) January 31, 2017, (ii) 30 days after the occurrence of such FDA approval and (iii) the occurrence of an event of default under the Amended LSA, in which case the additional loan amount would not be available while the event of default continues.  Upon the Company accessing the additional $5.0 million, the interest only period will be extended from February 1, 2017 to August 1, 2017.

 

In the event the Company prepays a term loan for any reason, the Company is obligated to pay a prepayment charge corresponding to a percentage of the principal amount of the applicable term loan prepaid.  The Amended LSA further modified the fees payable by the Company on mandatory or voluntary prepayment of a term loan prior to its maturity date as follows:  (i) for a prepayment made on or after the funding date of the applicable term loan through and including the first anniversary of its funding date, an amount equal to 3.00% of the principal amount of the term loan prepaid; (ii) for a prepayment made after the first anniversary of the funding date of the applicable term loan through and including the second anniversary of such funding date, an amount equal to 2.00% of the principal amount of such term loan prepaid; and (iii) for a prepayment of a term loan made after the second anniversary of its funding date and prior to its maturity date, an amount equal to 1.00% of the principal amount of the term loan prepaid.

 

Pursuant to the Amended LSA, (i) the Company paid a total facility fee of $125,000, consisting of $105,000 previously paid and an additional $20,000 paid on the date the Term B Loan was funded; (ii) certain adjustments were made to the time periods for any applicable prepayment fees; and (iii) certain defined terms were adjusted, including a new Amortization Date that is defined as (a) February 17, 2017, if the Term C Loan is not made and (b) August 1, 2017 if the Term C Loan is made.  The Amended LSA further provides for customary representations, warranties and covenants for the Company.  Except as otherwise amended, the Amended LSA does not alter the terms of the LSA.

 

In addition, on May 13, 2016, pursuant to the terms and conditions of the LSA as modified by the Amended LSA, the Company agreed to issue to the lenders warrants to purchase shares of its common stock, upon its draw of each term loan tranche. The aggregate number of shares of common stock issuable upon exercise of the warrants is equal to 3.95% of the amount drawn of such tranche, divided by the average reported closing price per share of common stock for the consecutive 10 trading days prior to the applicable draw.  

 

In connection with the Amended LSA, on May 13, 2016, the Company issued to Oxford a seven- year warrant, expiring on May 23, 2023, to purchase 24,800 shares of common stock at an exercise price of $6.37 per share, in accordance with the Company’s drawdown of the Term B Loan. The Company recorded $86,300 as the fair value of the warrant to additional paid-in capital and as a debt discount to the carrying value of the loan.  The key assumptions used to value the warrants included: volatility of 53.5% on the Company’s common stock based upon a pro rata percentage of the Company’s common stock’s volatility and similar public companies’ volatilities for comparison, an expected dividend yield of 0.0%, a risk-free interest rate of 1.51% and a term of seven years.

  

A summary of the Oxford loan balance as of September 30, 2016 and December 31, 2015 is as follows:

 

    September 30, 2016     December 31, 2015  
Gross proceeds   $ 20,000,000     $ 16,000,000  
Less: debt discount, net                
End of term fee     (1,285,702 )     (1,250,194 )
Warrants     (296,846 )     (310,196 )
Financing fees     (178,766 )     (192,398 )
Note payable   $ 18,238,686     $ 14,247,212